Positioned to seize a 10+ trillion dollar opportunity
The tokenization of real-world assets (RWAs) is a 10+ trillion dollar opportunity—with commodities projected to take a 3+ trillion dollar share by 2030. At KlimaDAO we are firmly aligned with this projection, and are working on catalyzing the growth of the Digital Carbon Market (DCM) in order to ensure that carbon credits gain increasing prominence in our toolkit of climate change solutions.
Since our inception in October 2021, KlimaDAO and its ecosystem have built out the DCM’s fundamental infrastructure and financial rails—making these available as public goods for the benefit of our planet. This has given $KLIMA token holders the power to govern a treasury of over 18 million carbon credits, as well as infrastructure that drives climate finance in the real world, positively impacting our climate and the wellbeing and development of communities globally.
Driven by KlimaDAO’s public infrastructure, the DCM leverages blockchain technology to digitize the Voluntary Carbon Market (VCM) and unlock value flow between supply- and demand-side participants through the unique benefits of public blockchains—enabling improved transparency, liquidity, and interoperability.
The seeds have been sown for exponential growth in the VCM
When carbon credits are on-ramped or natively issued on the blockchain they become part of the RWA movement—digital representations of positive environmental impact created by projects around the world—whether they are restoring degraded mangroves, decarbonizing the energy grid, or accelerating our efforts to mitigate the release, or ramp up the capture, of greenhouse gasses in the atmosphere. These RWAs can then be traded or consumed (retired) by organizations looking to fulfill their sustainability strategies.
This digitization of carbon credits enables a leap toward enhanced transparency, accessibility, and efficiency for the entire value chain. Public blockchains bring about unparalleled transparency, ensuring that the lifecycle of each carbon credit —from issuance to retirement—is visible to all, helping to build trust among market participants. Blockchain technology also enhances scalability through smart contracts that automate transactions and verification processes, reducing bottlenecks and increasing overall market efficiency.
At KlimaDAO we anticipate this new digitized infrastructure to power growth in the VCM, propelling the carbon—and broader environmental commodities markets—to grow exponentially, ensuring that they play an ever greater role in our global efforts to mitigate climate change.
2024 will be a year where KlimaDAO evolves its role as a market catalyst, continuing to ramp up its capacity as a capital allocator, in order to enable the scale-up of climate finance globally via the DCM.
Allocating capital to drive real-world impact now
The RWA phenomenon isn't a thing of the future; it's happening now. Since 2021 the KlimaDAO community has passed 56 Klima Improvement Proposals (KIPs), with increased focus in 2023 on deploying the DAO’s treasury to fund new carbon projects. This has led to a substantial forward-carbon pipeline, with over USD 1.6 million in funding allocated to new carbon projects. Over the coming years these projects will yield carbon credits that will enter the DCM as tokenized RWAs, becoming available to purchase and retire via Carbonmark. These credits are currently an unrealized benefit and will be additive to KlimaDAO’s treasury, which already contains over 18 million tokenized carbon credits.
KlimaDAO’s funding has been essential to getting these projects off the ground, enabling them to deliver real-world impact. These successes are a testament to the innovative power of blockchain and Web3, which have enabled a novel governance process to accumulate and deploy treasury assets in the real world, to bring these assets back onto the blockchain, and make them available for use.
KlimaDAO’s forward carbon pipeline already showcases developing success stories in driving change on the ground.
Case study 1: Improved cookstoves for Rohingya Refugees in Bangladesh
Support for the Improved Cookstoves for Rohingya Refugees in Bangladesh project was ratified in KIP-32 via KlimaDAO’s governance process. The project aims to replace traditional wood-fuel cookstoves with high-efficiency biomass-fired improved cookstoves, reducing emissions and improving indoor air quality—with KlimaDAO’s funding contributing toward the acquisition and installation of 100,000 smokeless cookstoves.
The project contributes to solving a major challenge in Bangladesh, where 82% of households rely on polluting fuels and cooking technology, with around 135.2 million people lacking access to clean cooking. The project not only reduces emissions but also supports numerous Sustainable Development Goals, increasing people’s access to basic services and new technology while tackling poverty by reducing purchased fuel consumption. The project also generates employment for marketing, sales, distribution, and technical employees, thus aiding economic growth through the provision of decent work.
The project is well under way, with the cookstoves delivered and in use. Over the course of the next 12 months KlimaDAO will take delivery of the majority of forward credits issued, with a projected price of $12.50 per tonne.
Case study 2: Ocean alkalinity enhancement with Limenet
KlimaDAO’s investment of USD 600,000 in Limenet’s innovative Carbon Capture, Utilization, and Storage technology is propelling a major advancement in carbon dioxide removal. This investment is a pioneering effort in harnessing the ocean’s natural carbon sequestration capabilities. Limenet’s approach enhances oceanic alkalinity, enabling the ocean to absorb and stably sequester atmospheric CO2 in the form of bicarbonates. This process is dual purpose, simultaneously facilitating the restoration of marine ecosystems and addressing the critical issue of ocean acidification.
Limenet’s method, known as Buffered Ocean Alkalinity Enhancement (BOAE), represents a groundbreaking technique to industrialize the natural geological carbon cycle—not only capturing atmospheric carbon but also bolstering the ocean’s inherent carbon storage abilities. KlimaDAO will become Limenet’s first carbon offtaker, with the issued carbon credits becoming available exclusively on the Carbonmark marketplace.
Over the course of the next months KlimaDAO will take delivery of the majority of forward credits issued, with a projected price of $700 per tonne.
An ever-evolving technology stack solving real-world challenges
Developments in the DCM are continuing to drive transformative change, leading to deeper integration of blockchain technology into the market’s value chain. This shift is highlighted by several key developments in KlimaDAO’s ecosystem:
Real-time integration with the International Carbon Registry (ICR): ICR will emerge in 2024 as a vital backbone within the DCM, offering an advanced platform for the real-time tracking and trading of carbon credits. The passing of KIP-39 kicked off a workstream to integrate ICR-issued carbon credits into KlimaDAO’s retirement aggregator, enabling ICR to interoperate natively with the DCM ecosystem. The work is now coming to fruition, with the first credits now listed on Carbonmark, and additional work underway to standardize data and processes. This is a key development in opening access to digital-first carbon credits that inherit the benefits of public blockchains.
Paradigma's technological convergence – IoT and machine learning: Paradigma's strategic alliance with Carbonmark is setting a new benchmark for the value of RWAs. By integrating Internet of Things (IoT) and machine learning, Paradigma and Carbonmark will be able to surface rich carbon project data, augmenting tokenized carbon information on-chain. This development is uniquely enabled by the interoperability of the DCM’s public blockchain techstack.
KlimaDAO’s green ratio: The passing of KIP-55 formalized KlimaDAO’s Green Ratio, which establishes a framework for economic decision making pertaining to KlimaDAO’s treasury. Per the Green Ratio, KlimaDAO will allocate 50% of its capital to forward carbon allocations. As the projects in KlimaDAO’s forward carbon pipeline deliver their credits, KlimaDAO will grow in its ability to deploy capital into new projects on the ground, ensuring that its treasury grows, the DCM scales, and our planet benefits.
Looking forward to a sustainable future
Since its inception in the 2000s, the VCM has undergone a remarkable transformation, becoming an integral part of the global environmental economy. However, to clear headwinds and revitalize growth—as Bain & Company has emphasized—the VCM requires solutions that build transparency, impact, and trust. At KlimaDAO we believe that these solutions are uniquely enabled by the infrastructure that already exists in the form of the DCM.
Looking toward the rest of 2024, development activity in the DCM is buzzing, with much of the work carried out between 2021 and 2023 now coming to fruition. With digital-native carbon credits, demand-side users will be able to access richer data, enabling them to make more informed choices about how to execute their sustainability strategies. They will be able to use Carbonmark’s marketplace and API solutions to automate carbon sourcing and retirement, while also being able to showcase their environmental impact using immutable proofs.
With a dynamic ecosystem now in place, KlimaDAO is able to—guided by the Green Ratio—focus on its role as a neutral, trusted capital allocator, governed by diverse stakeholders. KlimaDAO is positioned to be a catalyst for growth, at the forefront of the impending boom in RWAs that is set to be a key theme of the rest of this decade.
Disclaimer:
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